The Firm and Market Structure Flashcards
The short-term shutdown point of production for a firm operating under perfect competition will most likely occur when:
A. price is equal to average total cost.
B. marginal revenue is equal to marginal cost.
C. marginal revenue is equal to average variable costs.
C. marginal revenue is equal to average variable costs.
Under conditions of perfect competition, a company will break even when market price is equal to the minimum point of the:
A. average total cost curve.
B. average variable cost curve.
C. short-run marginal cost curve
A. average total cost curve.
A company will shut down production in the short run if total revenue is less than:
A. fixed costs.
B. variable costs.
C. opportunity costs.
B. variable costs.
A company has total variable costs of $4 million and fixed costs of $3 million. Based on this information, the company will stay in the market in the long term if total revenue is at least:
A. $3.0 million.
B. $4.5 million.
C. $7.0 million.
C. $7.0 million.
When total revenue is greater than total variable costs but less than total costs, in the short term, a firm will most likely:
A. exit the market.
B. stay in the market.
C. shut down production.
B. stay in the market.
Under conditions of perfect competition, in the long run, firms will most likely earn:
A. normal profits.
B. positive economic profits.
C. negative economic profits.
A. normal profits.
A firm that increases its quantity produced without any change in per-unit cost is experiencing:
A. economies of scale.
B. diseconomies of scale.
C. constant returns to scale.
C. constant returns to scale.
A company is experiencing economies of scale when:
A. cost per unit increases as output increases.
B. it is operating at a point on the LRAC curve at which the slope is negative.
C. it is operating beyond the minimum point on the long-run average total cost curve.
B. it is operating at a point on the LRAC curve at which the slope is negative.
Diseconomies of scale most likely result from:
A. specialization in the labor force.
B. overlap of business functions and product lines.
C. discounted prices on resources when buying in larger quantities.
B. overlap of business functions and product lines.
A firm is operating beyond minimum efficient scale in a perfectly competitive industry. To maintain long-term viability, the most likely course of action for the firm is to:
A. operate at the current level of production.
B. increase its level of production to gain economies of scale.
C. decrease its level of production to the minimum point on the long-run average total cost curve.
C. decrease its level of production to the minimum point on the long-run average total cost curve.
Companies most likely have a well-defined supply function when the market structure is:
A. oligopoly.
B. perfect competition.
C. monopolistic competition.
B. perfect competition.
Aquarius, Inc. is the dominant company and the price leader in its market. One of the other companies in the market attempts to gain market share by undercutting the price set by Aquarius. The market share of Aquarius will most likely:
A. increase.
B. decrease.
C. stay the same.
A. increase.
Over time, the market share of the dominant company in an oligopolistic market will most likely:
A. increase.
B. decrease.
C. stay the same.
B. decrease.
